G.R. No.

168557 February 16,
2007
FELS ENERGY, INC., Petitioner,
vs.
THE PROVINCE OF BATANGAS and
THE OFFICE OF THE PROVINCIAL
ASSESSOR OF
BATANGAS, Respondents.
x----------------------------------------------------
x
G.R. No. 170628 February 16,
2007
NATIONAL POWER
CORPORATION, Petitioner,
vs.
LOCAL BOARD OF ASSESSMENT
APPEALS OF BATANGAS, LAURO C.
ANDAYA, in his capacity as the
Assessor of the Province of
Batangas, and the PROVINCE OF
BATANGAS represented by its
Provincial Assessor, Respondents.
DECISION
CALLEJO, SR., J.:
Before us are two consolidated cases
docketed as G.R. No. 168557 and G.R.
No. 170628, which were filed by
petitioners FELS Energy, Inc. (FELS)
and National Power Corporation (NPC), employees and (ii) construction permit
respectively. The first is a petition for
review on certiorari assailing the August
25, 2004 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 67490
and its Resolution2 dated June 20, 2005;
the second, also a petition for review on
certiorari, challenges the February 9,
2005 Decision3 and November 23, 2005
Resolution4 of the CA in CA-G.R. SP No.
67491. Both petitions were dismissed on
the ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into
a lease contract with Polar Energy, Inc.
over 3x30 MW diesel engine power
barges moored at Balayan Bay in
Calaca, Batangas. The contract,
denominated as an Energy Conversion
Agreement5 (Agreement), was for a
period of five years. Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR
shall be responsible for the payment of
(a) all taxes, import duties, fees, charges
and other levies imposed by the National
Government of the Republic of the
Philippines or any agency or
instrumentality thereof to which POLAR
may be or become subject to or in
relation to the performance of their
obligations under this agreement (other
than (i) taxes imposed or calculated on
the basis of the net income of POLAR
and Personal Income Taxes of its
fees, environmental permit fees and
other similar fees and charges) and (b)
all real estate taxes and assessments,
rates and other charges in respect of the
Power Barges.6
Subsequently, Polar Energy, Inc.
assigned its rights under the Agreement
to FELS. The NPC initially opposed the
assignment of rights, citing paragraph
17.2 of Article 17 of the Agreement.
On August 7, 1995, FELS received an
assessment of real property taxes on the
power barges from Provincial Assessor
Lauro C. Andaya of Batangas City. The
assessed tax, which likewise covered
those due for 1994, amounted to
₱56,184,088.40 per annum. FELS
referred the matter to NPC, reminding it
of its obligation under the Agreement to
pay all real estate taxes. It then gave
NPC the full power and authority to
represent it in any conference regarding
the real property assessment of the
Provincial Assessor.
In a letter7 dated September 7, 1995,
NPC sought reconsideration of the
Provincial Assessor’s decision to assess
real property taxes on the power barges.
However, the motion was denied on
September 22, 1995, and the Provincial
Assessor advised NPC to pay the
assessment.8 This prompted NPC to file
a petition with the Local Board of
Assessment Appeals (LBAA) for the
setting aside of the assessment and the
declaration of the barges as non-taxable
items; it also prayed that should LBAA
find the barges to be taxable, the
Provincial Assessor be directed to make
the necessary corrections.9
In its Answer to the petition, the
Provincial Assessor averred that the
barges were real property for purposes
of taxation under Section 199(c) of
Republic Act (R.A.) No. 7160.
Before the case was decided by the
LBAA, NPC filed a Manifestation,
informing the LBAA that the Department
of Finance (DOF) had rendered an
opinion10 dated May 20, 1996, where it is
clearly stated that power barges are not
real property subject to real property
assessment.
On August 26, 1996, the LBAA rendered
a Resolution11 denying the petition. The
fallo reads:
WHEREFORE, the Petition is DENIED.
FELS is hereby ordered to pay the real
estate tax in the amount of
₱56,184,088.40, for the year 1994.
SO ORDERED.12
The LBAA ruled that the power plant
facilities, while they may be classified as
movable or personal property, are
nevertheless considered real property for
taxation purposes because they are
installed at a specific location with a
character of permanency. The LBAA also
pointed out that the owner of the barges–
FELS, a private corporation–is the one
being taxed, not NPC. A mere agreement
making NPC responsible for the payment
of all real estate taxes and assessments
will not justify the exemption of FELS;
such a privilege can only be granted to
NPC and cannot be extended to FELS.
Finally, the LBAA also ruled that the
petition was filed out of time.
Aggrieved, FELS appealed the LBAA’s
ruling to the Central Board of
Assessment Appeals (CBAA).
On August 28, 1996, the Provincial
Treasurer of Batangas City issued a
Notice of Levy and Warrant by
Distraint13over the power barges, seeking
to collect real property taxes amounting
to ₱232,602,125.91 as of July 31, 1996.
The notice and warrant was officially
served to FELS on November 8, 1996. It
then filed a Motion to Lift Levy dated
November 14, 1996, praying that the
Provincial Assessor be further restrained
by the CBAA from enforcing the disputed
assessment during the pendency of the
appeal.
On November 15, 1996, the CBAA
issued an Order14 lifting the levy and
distraint on the properties of FELS in
order not to preempt and render
ineffectual, nugatory and illusory any
resolution or judgment which the Board
would issue.
Meantime, the NPC filed a Motion for
Intervention15 dated August 7, 1998 in the
proceedings before the CBAA. This was
approved by the CBAA in an
Order16 dated September 22, 1998.
During the pendency of the case, both
FELS and NPC filed several motions to
admit bond to guarantee the payment of
real property taxes assessed by the
Provincial Assessor (in the event that the
judgment be unfavorable to them). The
bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a
Decision17 finding the power barges
exempt from real property tax. The
dispositive portion reads:
WHEREFORE, the Resolution of the
Local Board of Assessment Appeals of
the Province of Batangas is hereby
reversed. Respondent-appellee
Provincial Assessor of the Province of
Batangas is hereby ordered to drop
subject property under ARP/Tax
Declaration No. 018-00958 from the List
of Taxable Properties in the Assessment
Roll. The Provincial Treasurer of
Batangas is hereby directed to act
accordingly.
SO ORDERED.18
Ruling in favor of FELS and NPC, the
CBAA reasoned that the power barges
belong to NPC; since they are actually,
directly and exclusively used by it, the
power barges are covered by the
exemptions under Section 234(c) of R.A.
No. 7160.19 As to the other jurisdictional
issue, the CBAA ruled that prescription
did not preclude the NPC from pursuing
its claim for tax exemption in accordance
with Section 206 of R.A. No. 7160. The
Provincial Assessor filed a motion for
reconsideration, which was opposed by
FELS and NPC.
In a complete volte face, the CBAA
issued a Resolution20 on July 31, 2001
reversing its earlier decision. The fallo of
the resolution reads:
WHEREFORE, premises considered, it
is the resolution of this Board that:
(a) The decision of the Board
dated 6 April 2000 is hereby
reversed.
(b) The petition of FELS, as well
as the intervention of NPC, is
dismissed.
(c) The resolution of the Local
Board of Assessment Appeals of
Batangas is hereby affirmed,
(d) The real property tax
assessment on FELS by the
Provincial Assessor of Batangas
is likewise hereby affirmed.
SO ORDERED.21
FELS and NPC filed separate motions
for reconsideration, which were timely
opposed by the Provincial Assessor. The
CBAA denied the said motions in a
Resolution22 dated October 19, 2001.
Dissatisfied, FELS filed a petition for
review before the CA docketed as CA-
G.R. SP No. 67490. Meanwhile, NPC
filed a separate petition, docketed as
CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a
Manifestation/Motion for Consolidation in
CA-G.R. SP No. 67490 praying for the
consolidation of its petition with CA-G.R.
SP No. 67491. In a Resolution23 dated
February 12, 2002, the appellate court
directed NPC to re-file its motion for
consolidation with CA-G.R. SP No.
67491, since it is the ponente of the
latter petition who should resolve the
request for reconsideration.
NPC failed to comply with the aforesaid
resolution. On August 25, 2004, the
Twelfth Division of the appellate court
rendered judgment in CA-G.R. SP No.
67490 denying the petition on the ground
of prescription. The decretal portion of
the decision reads:
WHEREFORE, the petition for review is
DENIED for lack of merit and the
assailed Resolutions dated July 31, 2001
and October 19, 2001 of the Central
Board of Assessment Appeals are
AFFIRMED.
SO ORDERED.24
On September 20, 2004, FELS timely
filed a motion for reconsideration seeking
the reversal of the appellate court’s
decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for
review dated October 19, 2004 before
this Court, docketed as G.R. No. 165113,
assailing the appellate court’s decision in
CA-G.R. SP No. 67490. The petition
was, however, denied in this Court’s
Resolution25 of November 8, 2004, for
NPC’s failure to sufficiently show that the
CA committed any reversible error in the
challenged decision. NPC filed a motion
for reconsideration, which the Court
denied with finality in a
Resolution26 dated January 19, 2005.
Meantime, the appellate court dismissed
the petition in CA-G.R. SP No. 67491. It
held that the right to question the
assessment of the Provincial Assessor
had already prescribed upon the failure
of FELS to appeal the disputed
assessment to the LBAA within the
period prescribed by law. Since FELS
had lost the right to question the
assessment, the right of the Provincial
Government to collect the tax was
already absolute.
NPC filed a motion for reconsideration
dated March 8, 2005, seeking
reconsideration of the February 5, 2005
ruling of the CA in CA-G.R. SP No.
67491. The motion was denied in a
Resolution27 dated November 23, 2005.
The motion for reconsideration filed by
FELS in CA-G.R. SP No. 67490 had
been earlier denied for lack of merit in a
Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the
petition docketed as G.R. No. 168557
before this Court, raising the following
issues:
A.
Whether power barges, which are
floating and movable, are personal
properties and therefore, not subject to
real property tax.
B.
Assuming that the subject power barges
are real properties, whether they are
exempt from real estate tax under
Section 234 of the Local Government
Code ("LGC").
C.
Assuming arguendo that the subject
power barges are subject to real estate
tax, whether or not it should be NPC
which should be made to pay the same
under the law.
D.
Assuming arguendo that the subject
power barges are real properties,
whether or not the same is subject to
depreciation just like any other personal
properties.
E.
Whether the right of the petitioner to
question the patently null and void real
property tax assessment on the
petitioner’s personal properties is
imprescriptible.29
On January 13, 2006, NPC filed its own
petition for review before this Court (G.R.
No. 170628), indicating the following
errors committed by the CA:
I in the present controversy, the Court was
THE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT THE
APPEAL TO THE LBAA WAS FILED
OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY
ERRED IN NOT HOLDING THAT THE
POWER BARGES ARE NOT SUBJECT
TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY
ERRED IN NOT HOLDING THAT THE
ASSESSMENT ON THE POWER
BARGES WAS NOT MADE IN
ACCORDANCE WITH LAW.30
Considering that the factual antecedents
of both cases are similar, the Court
ordered the consolidation of the two
cases in a Resolution31 dated March 8,
2006.1awphi1.net
In an earlier Resolution dated February
1, 2006, the Court had required the
parties to submit their respective
Memoranda within 30 days from notice.
Almost a year passed but the parties had
not submitted their respective
memoranda. Considering that taxes—the
lifeblood of our economy—are involved
prompted to dispense with the said
pleadings, with the end view of
advancing the interests of justice and
avoiding further delay.
In both petitions, FELS and NPC
maintain that the appeal before the LBAA
was not time-barred. FELS argues that
when NPC moved to have the
assessment reconsidered on September
7, 1995, the running of the period to file
an appeal with the LBAA was tolled. For
its part, NPC posits that the 60-day
period for appealing to the LBAA should
be reckoned from its receipt of the denial
of its motion for reconsideration.
Petitioners’ contentions are bereft of
merit.
Section 226 of R.A. No. 7160, otherwise
known as the Local Government Code of
1991, provides:
SECTION 226. Local Board of
Assessment Appeals. – Any owner or
person having legal interest in the
property who is not satisfied with the
action of the provincial, city or municipal
assessor in the assessment of his
property may, within sixty (60) days from
the date of receipt of the written notice of
assessment, appeal to the Board of
Assessment Appeals of the province or
city by filing a petition under oath in the
form prescribed for the purpose, together
with copies of the tax declarations and
such affidavits or documents submitted
in support of the appeal.
We note that the notice of assessment
which the Provincial Assessor sent to
FELS on August 7, 1995, contained the
following statement:
If you are not satisfied with this
assessment, you may, within sixty (60)
days from the date of receipt hereof,
appeal to the Board of Assessment
Appeals of the province by filing a
petition under oath on the form
prescribed for the purpose, together with
copies of ARP/Tax Declaration and such
affidavits or documents submitted in
support of the appeal.32
Instead of appealing to the Board of
Assessment Appeals (as stated in the
notice), NPC opted to file a motion for
reconsideration of the Provincial
Assessor’s decision, a remedy not
sanctioned by law.
The remedy of appeal to the LBAA is
available from an adverse ruling or
action of the provincial, city or municipal
assessor in the assessment of the
property. It follows then that the
determination made by the respondent
Provincial Assessor with regard to the
taxability of the subject real properties
falls within its power to assess properties
for taxation purposes subject to appeal
before the LBAA.33
We fully agree with the rationalization of
the CA in both CA-G.R. SP No. 67490
and CA-G.R. SP No. 67491. The two
divisions of the appellate court cited the
case of Callanta v. Office of the
Ombudsman,34 where we ruled that
under Section 226 of R.A. No 7160,35 the
last action of the local assessor on a
particular assessment shall be the notice
of assessment; it is this last action which
gives the owner of the property the right
to appeal to the LBAA. The procedure
likewise does not permit the property
owner the remedy of filing a motion for
reconsideration before the local
assessor. The pertinent holding of the
Court in Callanta is as follows:
x x x [T]he same Code is equally clear
that the aggrieved owners should have
brought their appeals before the LBAA.
Unfortunately, despite the advice to this
effect contained in their respective
notices of assessment, the owners
chose to bring their requests for a
review/readjustment before the city
assessor, a remedy not sanctioned by
the law. To allow this procedure would
indeed invite corruption in the system of
appraisal and assessment. It
conveniently courts a graft-prone
situation where values of real property
may be initially set unreasonably high,
and then subsequently reduced upon the
request of a property owner. In the latter
instance, allusions of a possible covert,
illicit trade-off cannot be avoided, and in
fact can conveniently take place. Such
occasion for mischief must be prevented
and excised from our system.36
For its part, the appellate court declared
in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth,
whenever the local assessor sends a
notice to the owner or lawful possessor
of real property of its revised assessed
value, the former shall no longer have
any jurisdiction to entertain any request
for a review or readjustment. The
appropriate forum where the aggrieved
party may bring his appeal is the LBAA
as provided by law. It follows ineluctably
that the 60-day period for making the
appeal to the LBAA runs without
interruption. This is what We held in SP
67490 and reaffirm today in SP 67491.37
To reiterate, if the taxpayer fails to
appeal in due course, the right of the
local government to collect the taxes due
with respect to the taxpayer’s property
becomes absolute upon the expiration of
the period to appeal.38 It also bears
stressing that the taxpayer’s failure to
question the assessment in the LBAA
renders the assessment of the local
assessor final, executory and
demandable, thus, precluding the
taxpayer from questioning the
correctness of the assessment, or from
invoking any defense that would reopen
the question of its liability on the merits.39
In fine, the LBAA acted correctly when it
dismissed the petitioners’ appeal for
having been filed out of time; the CBAA
and the appellate court were likewise
correct in affirming the dismissal.
Elementary is the rule that the perfection
of an appeal within the period therefor is
both mandatory and jurisdictional, and
failure in this regard renders the decision
final and executory.40
In the Comment filed by the Provincial
Assessor, it is asserted that the instant
petition is barred by res judicata; that the
final and executory judgment in G.R. No.
165113 (where there was a final
determination on the issue of
prescription), effectively precludes the
claims herein; and that the filing of the
instant petition after an adverse
judgment in G.R. No. 165113 constitutes
forum shopping.
FELS maintains that the argument of the
Provincial Assessor is completely
misplaced since it was not a party to the
erroneous petition which the NPC filed in
G.R. No. 165113. It avers that it did not
participate in the aforesaid proceeding,
and the Supreme Court never acquired
jurisdiction over it. As to the issue of
forum shopping, petitioner claims that no
forum shopping could have been
committed since the elements of litis
pendentia or res judicata are not present.
We do not agree.
Res judicata pervades every organized
system of jurisprudence and is founded
upon two grounds embodied in various
maxims of common law, namely: (1)
public policy and necessity, which makes
it to the interest of the
State that there should be an end to
litigation – republicae ut sit litium; and (2)
the hardship on the individual of being
vexed twice for the same cause – nemo
debet bis vexari et eadem causa. A
conflicting doctrine would subject the
public peace and quiet to the will and
dereliction of individuals and prefer the
regalement of the litigious disposition on
the part of suitors to the preservation of
the public tranquility and happiness.41 As
we ruled in Heirs of Trinidad De Leon
Vda. de Roxas v. Court of Appeals:42
x x x An existing final judgment or decree
– rendered upon the merits, without
fraud or collusion, by a court of
competent jurisdiction acting upon a
matter within its authority – is conclusive
on the rights of the parties and their
privies. This ruling holds in all other
actions or suits, in the same or any other
judicial tribunal of concurrent jurisdiction,
touching on the points or matters in issue
in the first suit.
xxx
Courts will simply refuse to reopen what
has been decided. They will not allow the
same parties or their privies to litigate
anew a question once it has been
considered and decided with finality.
Litigations must end and terminate
sometime and somewhere. The effective
and efficient administration of justice
requires that once a judgment has
become final, the prevailing party should
not be deprived of the fruits of the verdict
by subsequent suits on the same issues
filed by the same parties.
This is in accordance with the doctrine of
res judicata which has the following
elements: (1) the former judgment must
be final; (2) the court which rendered it
had jurisdiction over the subject matter
and the parties; (3) the judgment must
be on the merits; and (4) there must be
between the first and the second actions,
identity of parties, subject matter and
causes of action. The application of the
doctrine of res judicata does not require
absolute identity of parties but merely
substantial identity of parties. There is
substantial identity of parties when there
is community of interest or privity of
interest between a party in the first and a
party in the second case even if the first
case did not implead the latter.43
To recall, FELS gave NPC the full power
and authority to represent it in any
proceeding regarding real property
assessment. Therefore, when petitioner
NPC filed its petition for review docketed
as G.R. No. 165113, it did so not only on
its behalf but also on behalf of FELS.
Moreover, the assailed decision in the
earlier petition for review filed in this
Court was the decision of the appellate
court in CA-G.R. SP No. 67490, in which
FELS was the petitioner. Thus, the
decision in G.R. No. 165116 is binding
on petitioner FELS under the principle of
privity of interest. In fine, FELS and NPC
are substantially "identical parties" as to
warrant the application of res judicata.
FELS’s argument that it is not bound by
the erroneous petition filed by NPC is
thus unavailing.
On the issue of forum shopping, we rule
for the Provincial Assessor. Forum
shopping exists when, as a result of an
adverse judgment in one forum, a party
seeks another and possibly favorable
judgment in another forum other than by
appeal or special civil action or certiorari.
There is also forum shopping when a
party institutes two or more actions or
proceedings grounded on the same
cause, on the gamble that one or the
other court would make a favorable
disposition.44
Petitioner FELS alleges that there is no
forum shopping since the elements of
res judicata are not present in the cases
at bar; however, as already discussed,
res judicata may be properly applied
herein. Petitioners engaged in forum
shopping when they filed G.R. Nos.
168557 and 170628 after the petition for
review in G.R. No. 165116. Indeed,
petitioners went from one court to
another trying to get a favorable decision
from one of the tribunals which allowed
them to pursue their cases.
It must be stressed that an important
factor in determining the existence of
forum shopping is the vexation caused to
the courts and the parties-litigants by the
filing of similar cases to claim
substantially the same reliefs.45 The
rationale against forum shopping is that
a party should not be allowed to pursue
simultaneous remedies in two different
fora. Filing multiple petitions or
complaints constitutes abuse of court
processes, which tends to degrade the
administration of justice, wreaks havoc
upon orderly judicial procedure, and
adds to the congestion of the heavily
burdened dockets of the courts.46
Thus, there is forum shopping when
there exist: (a) identity of parties, or at
least such parties as represent the same
interests in both actions, (b) identity of
rights asserted and relief prayed for, the
relief being founded on the same facts,
and (c) the identity of the two preceding
particulars is such that any judgment
rendered in the pending case, regardless
of which party is successful, would
amount to res judicata in the other.47
Having found that the elements of res
judicata and forum shopping are present
in the consolidated cases, a discussion
of the other issues is no longer
necessary. Nevertheless, for the peace
and contentment of petitioners, we shall
shed light on the merits of the case.
As found by the appellate court, the
CBAA and LBAA power barges are real
property and are thus subject to real
property tax. This is also the inevitable
conclusion, considering that G.R. No.
165113 was dismissed for failure to
sufficiently show any reversible error. Tax
assessments by tax examiners are
presumed correct and made in good
faith, with the taxpayer having the
burden of proving otherwise.48 Besides,
factual findings of administrative bodies,
which have acquired expertise in their
field, are generally binding and
conclusive upon the Court; we will not
assume to interfere with the sensible
exercise of the judgment of men
especially trained in appraising property.
Where the judicial mind is left in doubt, it
is a sound policy to leave the
assessment undisturbed.49 We find no
reason to depart from this rule in this
case.
In Consolidated Edison Company of New
York, Inc., et al. v. The City of New York,
et al.,50 a power company brought an
action to review property tax
assessment. On the city’s motion to
dismiss, the Supreme Court of New York
held that the barges on which were
mounted gas turbine power plants
designated to generate electrical power,
the fuel oil barges which supplied fuel oil
to the power plant barges, and the
accessory equipment mounted on the
barges were subject to real property
taxation.
Moreover, Article 415 (9) of the New Civil
Code provides that "[d]ocks and
structures which, though floating, are
intended by their nature and object to
remain at a fixed place on a river, lake, for the purpose of converting Fuel of
or coast" are considered immovable NAPOCOR into electricity.52
property. Thus, power barges are
categorized as immovable property by It follows then that FELS cannot escape
destination, being in the nature of liability from the payment of realty taxes
machinery and other implements by invoking its exemption in Section 234
intended by the owner for an industry or (c) of R.A. No. 7160, which reads:
work which may be carried on in a
building or on a piece of land and which SECTION 234. Exemptions from Real
tend directly to meet the needs of said Property Tax. – The following are
industry or work.51 exempted from payment of the real
property tax:
Petitioners maintain nevertheless that
the power barges are exempt from real xxx
estate tax under Section 234 (c) of R.A.
No. 7160 because they are actually,
(c) All machineries and equipment that
directly and exclusively used by
are actually, directly and exclusively used
petitioner NPC, a government- owned
by local water districts and government-
and controlled corporation engaged in
owned or controlled corporations
the supply, generation, and transmission
engaged in the supply and distribution of
of electric power.
water and/or generation and
transmission of electric power; x x x
We affirm the findings of the LBAA and
CBAA that the owner of the taxable
Indeed, the law states that the machinery
properties is petitioner FELS, which in
must be actually, directly and exclusively
fine, is the entity being taxed by the local
used by the government owned or
government. As stipulated under Section
controlled corporation; nevertheless,
2.11, Article 2 of the Agreement:
petitioner FELS still cannot find solace in
this provision because Section 5.5,
OWNERSHIP OF POWER Article 5 of the Agreement provides:
BARGES. POLAR shall own the Power
Barges and all the fixtures, fittings,
OPERATION. POLAR undertakes that
machinery and equipment on the Site
until the end of the Lease Period, subject
used in connection with the Power
to the supply of the necessary Fuel
Barges which have been supplied by it at
pursuant to Article 6 and to the other
its own cost. POLAR shall operate,
provisions hereof, it will operate the
manage and maintain the Power Barges
Power Barges to convert such Fuel into
electricity in accordance with Part A of
Article 7.53
It is a basic rule that obligations arising
from a contract have the force of law
between the parties. Not being contrary
to law, morals, good customs, public
order or public policy, the parties to the
contract are bound by its terms and
conditions.54
Time and again, the Supreme Court has
stated that taxation is the rule and
exemption is the exception.55 The law
does not look with favor on tax
exemptions and the entity that would
seek to be thus privileged must justify it
by words too plain to be mistaken and
too categorical to be
misinterpreted.56 Thus, applying the rule
of strict construction of laws granting tax
exemptions, and the rule that doubts
should be resolved in favor of provincial
corporations, we hold that FELS is
considered a taxable entity.
The mere undertaking of petitioner NPC
under Section 10.1 of the Agreement,
that it shall be responsible for the
payment of all real estate taxes and
assessments, does not justify the
exemption. The privilege granted to
petitioner NPC cannot be extended to
FELS. The covenant is between FELS
and NPC and does not bind a third
person not privy thereto, in this case, the
Province of Batangas.
It must be pointed out that the protracted SO ORDERED.
and circuitous litigation has seriously
resulted in the local government’s
deprivation of revenues. The power to
tax is an incident of sovereignty and is
unlimited in its magnitude,
acknowledging in its very nature no
perimeter so that security against its
abuse is to be found only in the
responsibility of the legislature which
imposes the tax on the constituency who
are to pay for it.57 The right of local
government units to collect taxes due
must always be upheld to avoid severe
tax erosion. This consideration is
consistent with the State policy to
guarantee the autonomy of local
governments58 and the objective of the
Local Government Code that they enjoy
genuine and meaningful local autonomy
to empower them to achieve their fullest
development as self-reliant communities
and make them effective partners in the
attainment of national goals.59
In conclusion, we reiterate that the power
to tax is the most potent instrument to
raise the needed revenues to finance
and support myriad activities of the local
government units for the delivery of basic
services essential to the promotion of the
general welfare and the enhancement of
peace, progress, and prosperity of the
people.60
WHEREFORE, the Petitions are
DENIED and the assailed Decisions and
Resolutions AFFIRMED.